The Green Sheet Online Edition

June 28, 2010 • Issue 10:06:02

Prepaid's relevancy for mass transit reaffirmed

As the move to electronic mass transit fare payment systems speeds along, a white paper issued by the Smart Card Alliance offers a reminder that a prepaid card component to such systems should not be overlooked.

In the March 2010 report, A Guide to Prepaid Cards for Transit Agencies, the case was made that transit agencies have a long-standing commitment to serve their entire riderships. Even though agencies for big cities are looking to implement systems that allow riders to use traditional bankcards to pay for fares, constituencies without access to credit and debit cards must be taken into consideration.

"Because some segments of a transit agency's ridership may not qualify for a credit or debit card or may be uninterested in establishing a relationship with a bank, transit agencies should consider promoting the use of prepaid cards that can operate like a bankcard but be available to anyone," the paper said.

A smart legacy

Currently, cities like Chicago, Washington D.C., Atlanta, San Francisco and Boston run on smart cards, which are essentially prepaid cards, according to Randy Vanderhoof, Executive Director of the Smart Card Alliance. The electronic systems use closed-loop, near field communication-enabled smart cards that are loaded and reloaded with funds. Those funds can be supplied by bankcards or cash.

Creating open-loop systems that use network-branded cards - such as Visa Inc. and MasterCard Worldwide-branded debit and credit cards - is the next step many transit authorities want to take. "It looks like there is strong indication that at least the larger metropolitan transit operators are embracing open bankcard payment technology utilizing the existing contactless payment technology available for credit cards and debit cards," Vanderhoof said.

But that rush by transit agencies to embrace a new and cheaper technological solution cannot leave behind the legacy smart card systems on which people still rely. That is why prepaid cards "provide a means for the transit agency to cover the diverse needs of its constituents," the SCA paper said. "As a result, prepaid solutions are highly relevant to an agency planning to introduce open payment systems based on banking products."

Therefore, the SCA advises transit authorities to retain their smart card legacy systems for customers who don't carry contactless bankcards. "However, an agency could also decide to use network-branded contactless prepaid cards to achieve the same market coverage," the paper stated. "This strategy would enable a single technical approach to serve all riders."

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